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Homebase commences store closure plan and sells Battersea store for 57m

Home Retail Group PLC Monday said its Homebase unit has exchanged contracts to sell its freehold store in Battersea, South London, and expects to close about 25 stores in its current financial year, cutting its revenue but boosting profits and cash flow.

The owner of the Homebase DIY chain and the Argos general retailer had said last month it wanted to shrink its Homebase estate by about a quarter by 2018 in an attempt to improve the profitability of the business. That means about 80 stores will be closed in total.

On Monday, it said the sale of the Battersea store and the 25 other store closures it will complete in the current financial year will cut sales by about 2% in the current year and about 3% in its next financial year. It will book GBP10 million of closure costs in the current year, but has already booked this amount as a provision for property, meaning no overall impact on its results. It expects to book an exceptional gain of about GBP38 million - the profit on the Battersea site sale - in the following financial year.

It also expects a £30 million boost to its cash flow statement this year and £27 million next year, while it will also book a £5 million improvement to its working capital this year, and a loss of £10 million for the closure costs.

It said it will sell the Battersea site for £57 million to a residential property developer, getting £30 million in the current financial year that ends on February 28, 2015, and the remaining £27 million in the following fiscal year. It will book a gain on the sale of about £38 million in fiscal 2016. It expects the deal to complete in about a year.

It said the closure of the other 25 Homebase stores won't have a material impact on its benchmark pretax profit this year or next, partly because they include two profitable stores that Homebase was unable to renew on lease expiry, which are not part of the previously announced store exit programme.

Home Retail shares were down 0.2% at 192.50 pence early Monday.

Source : Steve McGrath -  LSE


24 November 2014

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